U.S. stocks surge most since January on optimism for debt deal

U.S. stocks jumped, with benchmark indexes rallying the most since January, as signs grew that lawmakers could reach an agreement to increase the debt ceiling and avoid a default.

Nike Inc., Boeing Co. and American Express Co. rose more than 3.2%, leading advances among large companies. Wells Fargo & Co. and JPMorgan Chase & Co. gained at least 2.6% before reporting earnings tomorrow. Gilead Sciences Inc. jumped 6% as the largest biotechnology company by market value said the cancer drug idelalisib improved survival times.

The Standard & Poor’s 500 Index (CME:SPZ13) rallied 2.1% to 1,691.11 at 3:30 p.m. in New York. The Dow Jones Industrial Average advanced 297.80 points, or 2%, to 15,100.78. Both gauges have their biggest gains since Jan. 2. Trading in S&P 500 stocks was 11% above the 30-day average at this time of day.

“You’re taking the nuclear option off the table, the fact that we’ll blow through the debt ceiling, that’s not going to happen,” Dan Veru, the chief investment officer who helps oversee $4.5 billion at Palisade Capital Management LLC, said in a phone interview from Fort Lee, New Jersey. “This continues to put pressure on lawmakers to get a deal done because they’re seeing that just in fact talking is what markets want them to” do, he said.

Benchmark equity indexes surged as House Republican leaders proposed a short-term increase in the debt ceiling that would reduce the prospects for a U.S. default.

Limit Increase

The plan would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17 and wouldn’t end the 10-day-old partial shutdown of the federal government.

President Barack Obama would support a short increase in the U.S. debt limit with no “partisan strings attached,” though he prefers a longer extension, Jay Carney, the White House press secretary, said today.

The S&P 500 added 0.1% yesterday, halting a two-day, 2.1% slide, amid the signs of progress on the fiscal impasse and optimism that Janet Yellen, nominated to lead the Federal Reserve, won’t rush to withdraw stimulus.

The gauge’s rally today is the biggest since a 2.5% surge on the first trading day of the year, when lawmakers passed a bill averting spending cuts and tax increases known as the fiscal cliff. The index has advanced 0.6% since the government shutdown began Oct. 1, and has trimmed its decline to 2% since its record of 1,725.52 on Sept. 18.